Hershey (NYSE:HSY): Short?

Deutsche Bank is out with a negative call on Hershey (NYSE:HSY) reiterating their HOLD opinion based on challenging fundamentals incl. competition and input cost volatility, a premium valuation, and difficulty of the changing US choc. market. Although long term they believe the Trust will change its strategic approach, they don't think action will occur short term.

Firm highlights several scenarios noting most point to downside risk:

- Hershey-Cadbury deal would value the stock around $36 per share.

- Cadbury-Hershey deal would vlue HSY around $47-$48 but there is minimal pressure on Cadbury to pay a premium for Hershey and, given activist shareholders and questions about Cadbury's execution missteps, any dilution to Cadbury would be viewed with significant skepticism.

- Nestle-Hershey. Recent unconfirmed press reports, as for example, in the Dow Jones wire service, on a Nestle-Hershey JV has led to investors bidding up the shares of Hershey. While an agreement between the two would certainly be advantageous to Hershey as it gives the company global distribution, the firm doesn't see much upside for Nestle.

- Kraft-Hershey. This scenario to DB is the most unlikely.

Hershey's leadership team will host an analyst meeting in NYC on 6/17/08. With numerous intermediate term challenges, the firm expects CEO West to focus on LT turnaround efforts incl. greater brand support and higher quality. As a result, they expect mgmt to lower LT EPS growth expectations to 6-8% vs. previous 9-11%.

Notablecalls: I think this is the call that should put the recent takeover chatter to rest. Would strongly consider shorting the stock here for a reactionary move down (would not overstay my welcome, though)

Dell (NASDAQ:DELL): Downgraded to Sell at Cross Research

- According to the firm while DELL reported F1Q09 EPS upside driven by higher revenue and aided by lower share count ($0.03 benefit), gross margins were down (83 bps y/y), despite a favorable component pricing environment, contributing to a 73 bps y/y decline in operating margin. Dell reported unit share gains (total units up 22%) in all geographies, driven they believe by aggressive pricing and at the expense of margin. Assuming component pricing increases somewhat (as most companies are now expecting) and emerging markets sales continue to increase, the firm believes gross margin will be difficult to maintain/or improve.

Based on where the firm assumes the stock will open this morning (DELL is now trading in the mid teens versus consensus and HP around 10x to 11x), they think significant, positive quarterly earnings surprises will be required to provide much upside to the share price. With exposure to the US, potential for a slowdown overseas, need to fund the enterprise leasing business (potential drag on earnings and significant use of cash) and apparent aggressive pricing required to drive revenue growth, they are lowering their rating to Sell with a price target of $19.

Notablecalls: Note that Lehman is also out on DELL saying they were quite surprised by the magnitude of the after-hours reaction. Co reported EPS of $0.38 vs consensus of $0.33, and they believe that excluding about $0.04 in net benefits, EPS was actually largely in-line. Revs from notebooks, servers, storage, services, and S&P modestly exceeded their ests, while desktops fell short. Currency & acquisitions added almost 6 points of help y/y.

I think DELL may be a short here below $24.

Cover your Solar shorts! - Piper Jaffray

Piper Jaffray is out with a Solar call saying that according to German news agency DPA, and supported by their contacts close to the Social Democrat Party (SPD), the German Government reached final agreement on feed-in tariff reduction for Solar and Wind at 02.00 AM this morning. They understand that the agreement will be incorporated in the EEG bill on Monday by which time the feed-in tariff reduction will be made public. They also understand that the bill will be voted through parliament as early as Friday next week rather than end of June.

The feed-in tariff reduction is said to be 8% for 2009 (previous 9.1%), 8% for 2010(previous 7%) and 9% for 2011 and onwards (previous 8%).

Notablecalls: Good news for Solars as most of the stocks have been getting hit lately on fears of Germany lowering support for its solar initiative. I expect the likes of STP, FSLR, SPWR retrace at least most of their yesterday's losses. Note the worst case expectations were for 30% decline in 2009.

Short Term Actionable Call

Amdocs (NYSE:DOX): Citigroup raising estimates above consensus - Expect upside to stock

Citigroup is out very positive on Amdocs Ltd (NYSE:DOX) raising their revenue estimates above consensus for the rest of this year. Citi's new FY08 EPS estimate is also modestly above consensus. They believe that the progress DOX has made on its Sprint transition and the robust selling environment for telecom support services supports our incrementally bullish stance. DOX should react positively, as it returns to beating consensus revenue estimates after a break of 6 quarters. Reits Buy and $46 DOX.

For each of the next 3 quarters, they are now $6-$10 mil. above consensus for revenues - they also believe that there is potential upside to their estimates if DOX signs incremental business or if Sprint's own turnaround yields results. Citi is also raising FY08 EPS to $2.36 from $2.35, FY09 EPS to $2.63 from $2.60 and FY10 EPS to $2.88 from $2.86.

DOX has begun to deliver on expected 'inflection point' in revenue growth and margins. The perceived risks associated with Sprint should also abate now. The valuation (less than 13x CY08E of $2.43) is quite attractive, given the accelerating growth.

Notablecalls: I think this is a pretty strong call on Citi's part. Expect to see buy interest in the stock today.

Merrill Lynch cuts Solar Sector

SunPower (NASDAQ:SPWR) & Evergreen Solar (NASDAQ:ESLR) get cut to Sell from Neutral.

First Solar (NASDAQ:FSLR) tgt cut to $325 from $360. Maintains Buy.

German ruling CDU party says State support for solar power should fall by 30% in 2009 -- Reuters

NC

Early Morning Tidbits:

- Citigroup is somewhat cautious on American Intl (NYSE:AIG) lowering their tgt to $41 from $47 saying that despite the new funds, it is not clear that AIG's capital position is sufficient, as they believe it merely adds capital sufficiency for AIGFP without increasing former capital adequacy to the holding company. If AIG will need to funnel the funds to its subsidiaries, the rating agencies could suggest an increase in capital cushion. (Not sure it's a short here, though - NC)

- RBC Capital is upping Digital River's (NASDAQ:DRIV) tgt to $47 from $43. (Nice chart. Ugg likes it too - NC)

- Omnivision (NASDAQ:OVTI) downgraded to Perform at Opco just ahead of earnings. (Worth keeping an eye on. Ugg thinks OVTI will get killed on this d/g today. - NC)

- Kaufman is initiating a bunch of Solars today. My favourite is SunPower (NASDAQ:SPWR) as according to the firm the co is on track to double capacity in '08 while their models show SunPower exceeding revenue of FSLR in '09. Sets Buy & $120 tgt on.

Visa (NYSE:V): 2009-2010 ests raised to new Street high at SunTrust

SunTrust is out with a pretty major call on Visa (NYSE:V) reiterating their Buy rating and raising fiscal 2008, 2009 and 2010 EPS estimates and price target. Firm's target is $100, and new fiscal 2008, 2009 and 2010 EPS estimates are $2.11, $2.96 and $3.82, respectively. These compare with prior 2008, 2009 and 2010 EPS estimates of $2.04, $2.69 and $3.55. These sharply higher estimates reflect firm's confidence in Visa's volume growth, pricing power and operating leverage.

Firm argues that Visa and MasterCard (NYSE:MA) are the premier payments companies in their universe. These companies boast the most compelling franchises and exposure to the strongest global secular growth drivers. As a result, they should continue meaningfully outperforming Street mean revenue and EPS expectations. While they appear richly valued, they believe this is more a function of unrealistically low analyst estimates, rather than intrinsically rich multiples. Firm can support Buy ratings on each as their models make an effort to depict actual earnings power, rather than artificially conservative estimates.

SunTrust's significant fiscal 2009 and 2010 financial projection increases reflect modestly more aggressive volume and transaction growth in fiscal 2009, along with a more bullish view of the company's pricing power.

It is firm's view that most analysts have been unwilling to boost their growth forecasts for Visa as the company gave markedly conservative guidance during the IPO process and did not alter its long-term growth objectives following impressive 2Q08 outperformance. Further, while MasterCard has been public for two years, and has consistently posted organic revenue and earnings growth well ahead of its long-term goals, Visa has only beaten expectations for one quarter.

As a result, they believe analysts' MasterCard estimates are closer to reality than their Visa projections. This has created a situation in which V appears to have a valuation comparable with MA on EBITDA and higher on EPS. They believe the opposite is actually true, however.

Notablecalls: I think this is a pretty major call from SunTrust. I don't know how many of you remember but SunTrust was out on Mastercard on June 15 2007 with a hefty EPS raise (one that pretty much triggered another round of EPS raises by other firms).

Same thing may be happening with Visa here. Note that SunTrust's EPS ests for 2009-2010 are the new Street high.

Technically, the stock looks ready for a nice bounce.

ATA (NASDAQ:ATAI): Tgt upped to $24 from $17 at Piper Jaffray

Piper Jaffray raises ATA (NASDAQ:ATAI) tgt to $24 from $17 saying they understand China's Ministry of Health has already given ATA control of its registration system and as such, expect tests will soon be delivered to the Ministry's doctor and possibly nurse population. Firm also learned the company has been in discussions for some time with the Ministry of Justice and believes a new testing relationship could be announced in the not too distant future.

Notablecalls: Thin name to keep on the radar as Piper's call seems pretty significant. - (as disted on NCN)

Apple (NASDAQ:AAPL): Added to Conviction Buy List at Goldman

Goldman Sachs adds Apple (NASDAQ:AAPL) to their Conviction Buy list.

Remember what Amazon.com (NASDAQ:AMZN) did on Monday?

PS: I think there are plenty of shorts in this one as general view has been lately that AAPL is vulnerable to the downside.

NC

VeriFone (NYSE:PAY): First Data could buy PAY - SunTrust

SunTrust analyst Andrew Jeffrey is out with a major call on VeriFone (NYSE:PAY) saying the protracted internal accounting challenges, and the shares resulting swoon, leave the company susceptible to a hostile takeover bid. Firm sees First Data Corp. as the most likely suitor and the most logical strategic partner for VeriFone. Further, a recent conversation with a leading value-added reseller leaves them confident that VeriFone's market share has not suffered from its internal accounting challenges. Firm believes a business combination would significantly extend FDC's distribution reach and technology capabilities while sharply lowering its manufacturing costs. Reits Buy and $22 tgt on PAY.

Notablecalls: Looking for a $0.50-1.00 move in PAY - fyi. (As distributed on NCN)

First Marblehead (NYSE:FMD): Upgraded at FBR

The unthinkable has happened - FBR has upgraded First Marblehead (NYSE:FMD):

Rating goes to Market Perform from Underperform on belief that much of the bad news is baked into the stock, particularly with early indications of thawing within the private student loan ABS (SLABS) market. Notwithstanding the company's increased risk to its residual receivables following rising credit losses and TERI's bankruptcy filing, the firm no longer believes the risk/reward warrants an Underperform rating for First Marblehead shares at current levels, especially as derivative benefits might start to form, stemming from governmental efforts to provide funding to the federally guaranteed student loan market. Trading at 43% of stated tangible book and approximately at the cash on hand, they believe the shares reflect a near total impairment of the company's residual receivables. While further operating losses and possible liabilities related to the failure to securitize customer loans could drive the liquidation value to the company lower, we view the potential for acquisition and/or the eventual opening of the ABS market as balancing risks.

Assuming a 100% impairment of the company's existing residuals, thereby eliminating the financial exposure to its outstanding trusts, FBR calculates this will result in a pro forma tangible book of $2.85 per share. Though the company will continue to bleed cash until it is able to access the capital markets, they believe the company becomes increasingly attractive as a target for its loan database and origination platform—along with the nearly $2.95 per share of cash. Furthermore, in the event the securitization market opens up, the stock is set up for a potential squeeze with an estimated 22% of the float short. Balancing the upside, in their opinion, are the risk of cash burn, cannibalization from higher FFELP loan limits, warehouse refinancing uncertainty, and loss of loan volume from JPMorgan Chase, Bank of America, and RBS Citizens—which collectively represented 76% of the company's volume.

Notablecalls: FBR has been negative on FMD since 2006 and rightly so. With the firm stepping back from their negative stance I suspect we may see some considerable short covering (& even buying). The stock can be viewed as a call option here - JPM & BAC may actually return as clients when dust settles. If that happens FMD will be a $10+ stock again. Unless it gets bought in the n-t.

Limited downside and ample upside is what you get here. I'm taking it.

PS: My gut tells me FMD could do $3.25+ today.

Verigy Ltd. (Nasdaq;VRGY): Positive comments from Goldman Sachs

Goldman Sachs has a positive piece on Verigy Ltd. (VRGY), saying they expect the stock to react positively to in-line results and guidance given the recent concerns regarding a top-line miss driven by share loss to Teradyne. They continue to believe that the share loss concerns are misguided as Verigy has gained ~700bps of share over the last several years all while competitors claimed Verigy was losing share. While Verigy did guide for a significant qoq decline in CQ1 revenues, firm believes the weak sales guidance was driven by memory, with SoC revenues guided essentially flat qoq. Our view is that Verigy remains well positioned in SoC and we expect the company to continue to expand its SoC share. In addition, DDRIII should be a significant driver in 2H08 with Intel requiring DDRIII for the Nehalem launch in Q4. Verigy is well positioned to gain significant DRAM test share with the DDRIII transition.

Firm believes that Verigy's business model/profitability are undervalued with Verigy's stock trading at a 33% discount to Teradyne's on normalized EPS despite Verigy's significantly better full cycle profitability. Their view is that the multiple gap between the stocks should narrow as concerns over share loss subside and we expect Verigy's stock buyback (to begin 2 or 3 days after
earnings) to be a significant positive catalyst.

Notablecalls: So we have a Tier-1 firm calling for positive reaction on the stock for two reasons: earnings report and share buyback, both happening near-term. What can I say, it's a buy today.

Red Robin Gourmet (NASDAQ:RRGB): Bounce play?

Red Robin Gourmet (NASDAQ:RRGB) is getting some defending comments from couple of firms:

- Jefferies notes RRGB reported 1Q08 EPS of $0.43, well short of the $0.50 Street estimate – with most sell-siders, including them, being caught off guard by greater than expected food costs and less than expected G&A leverage. Food cost pressure partially explained by sales mix shift and low 1Q07 food cost comparison. G&A pressure the result of advertising expense timing with an equal beneficial offset coming in 2Q08. With RRGB reiterating its full-year EPS guidance range (net of $0.04 acquisition accretion), Street numbers are likely headed up over balance of year offsetting the 1Q EPS shortfall on full-year basis. jeffco is sticking with theri 2008 EPS estimate of $2.13 as they raised EPS estimates last week to account for the acquisition accretion.

With shares up almost 20% over the last 4 weeks– the in-line EPS guidance numbers and news of housing market headwinds will likely result in RRGB shares giving back a sizeable chunk of that move today. Key tenet of their Buy thesis remains intact and that is that with recent and expected earnings now among the most stable in the growth sector, they expect RRGB's relative fundamental strength in coming quarters to drive merit-based multiple expansion.

Reits Buy and $46 tgt.

- Morgan Stanley notes 1Q EPS fell well short of their mark ($0.43 vs $0.51), but the miss was entirely related to costs. Offsetting this, sales exceeded firm's expectations with comps up an industry leading 3.9%. RRGB raised annual guidance by $0.04 to account for a franchise
acquisition. While this back end loads 2008 EPS, they think it’s feasible based on current trends and increased pricing. With estimates essentially intact and valuation among lowest of peers, MSCO remains buyers of RRGB.

Reits Overweight and $46 tgt

Notablecalls: RRGB continues to be an analyst darling here & I think will provide a bounce opportunity today. The only question here is where to start scaling in. My gut tells me sub-$36 level is where I wanna start w/ $35 already representing a 'screaming buy' point.

The first miss is almost always forgiven. RRGB has a lot of West Coast exposure, so considering that the qtr was still fine.

Sandisk (NASDAQ:SNDK): Davenport reits Strong Buy

Davenport reits Strong Buy on Sandisk (NASDAQ:SNDK) saying the sell-off on CEO comments appears to be overdone. SNDK shares sold off aggressively yesterday (taking the broader market with them) following comments by CEO Eli Harari at a technology conference that U.S. memory card sales were “relatively soft” in April and demand was similar to what the company experienced during 1Q’08. Dr. Harari also voiced his belief that high energy prices are likely having some impact on US consumer spending.

Firm ntoes they are surprised by the magnitude of the market’s reaction (down $2.42 or 7.5%) to these comments as they are in-line with the tone management struck during its 1Q’08 conference call on April 17th when they suggested that U.S. consumer weakness would continue throughout the balance of the month. Further, Dr. Harari indicated that SNDK’s business remains robust outside the US, as was the case in 1Q’08 when non-US sales powered the company to ~5% revenue upside versus consensus despite US weakness. Finally, as was stated during the conference, SNDK’s 2Q performance is generally heavily back-end loaded with the vast majority of the company’s 2Q performance yet to be
recorded.

More importantly, SNDK indicated that it continues to expect business conditions to improve during the second half of the year as a more benign pricing environment and seasonal strength combine for much improved 2H results.

Notablecalls: SNDK's a buy here at $29 and change. See below.

Sandisk (NASDAQ:SNDK): Buying opportunity has emerged - Citigroup

Citigroup is out with a pretty brilliant defense on Sandisk (NASDAQ:SNDK) noting the shares fell 7.5% after a morning conference presentation by CEO Eli Harari, a drag on the SOXX. Citi's review of broader NAND data suggests a buying opportunity has emerged.

The typically upbeat Harari was noticeably restrained. That said, he indicated Europe remains strong (44% of sls), and left OEM sales un-addressed (all geos; 42% of sls).

Firm notes that understandably they braced for weak April US retail sell through data (cards+drives+MP3 players) in the afternoon's NPD release. However, we found SNDK bit growth was just 300 bps below seasonal (helped by easy comp) while ASPs were actually 300 bps better than seasonal. Separately, theyconfirmed with SNDK that its Europe and Asia market share trends are firm, the OEM biz solid. Firm concludes SNDK is likely working to keep Street expectations in check, in particular as: 1) much of the Mom's/Prom's/Dad's/Grads selling season lies ahead, and 2) some competitors have recently raised 2Q GM ests (2Q08 to be the trough). Overall, they are comfortable with their 2Q08, 3Q08 and 2008 ests.

While end demand risks persist, the body of evidence Citi sees continues to point
toward steadily firming fundamentals into and through 3Q08.

They think positive EPS revision catalysts remain in play in July through October and on a target of $35, but with upside to $40 if multiples inflate seasonally.

Reits Buy.

Notablecalls: I think Citi is doing the right thing here defending SNDK. What we saw yesterday was just profit taking following the recent run (can't blame the bold ones who bought the stock in the low 20's taking some of it off the table). Citi has done a good job covering SNDK recently and I think the stock is a bounce candidate here.

For the record, Lazard and JPM are somewhat cautious on SNDK this AM. - fyi only.

The stock's a buy below $30.

Early morning tidbits: SLB, WGOV, COF

- Schlumberger (NYSE:SLB): Lehman raises price tgt to $142 from $120. (good chart)

- Woodward Governor (NASDAQ:WGOV): Downgraded to Neutral from Outperform at Baird. (stock has had a good run recently and Baird's tgt stands at $40. They would be buyers in the low 30's. Likely a short above $38. Remember, Baird downgrades have historically been among the best movers).

- Oppemheimer's Meredith Whitney is out neg on the financials again. Capital One (NYSE:COF) is getting its ests slashed. No surprise there, though.

NC

China Digital TV (NYSE:STV): Buy the dip - Morgan Stanley

Morgan Stanley is positive on China Digital TV (NYSE:STV) noting the stock stock price dropped 10%+ post its 1Q08 result – a market overreaction in firm's view. They see CDTV as a ‘proxy’ for China’s digital cable TV market, one of the fastest-growing consumer sectors in China (digital cable TV homes in China may grow at a 5-year CAGR of 45% from 2007-2012).

Notably, some rivals offer smart cards at only half of CDTV’s price. Yet on firm's observation, they are barely breakeven and may soon be squeezed out of the market if they cannot capture a meaningful market share.

Investors are currently paying only ~US$1bn for CDTV, which owns half of the digital smart card market in China, a nation that hosts one-third of the global cable TV viewers and whose cable TV ARPU (average revenue per user) only amounts to 2-3% of the level in the US. 3

Morgan Stanley's DCF-based fair value of US$37 per share implies over 100% upside.

Reits Overweight.

Notablecalls: STV looks like it wants to bounce. Morgan Stanley provides a reason to buy. I expect it to trade over $18 level today.

Yahoo (NASDAQ:YHOO): Shares likely to trade lower on today's new - Jefferies

Jefferies comments on Yahoo (NASDAQ:YHOO) noting that over the week-end, Microsoft issued a press release stating that "it is considering and has raised with Yahoo! an alternative that would involve a transaction with Yahoo! but not an acquisition of all of Yahoo!" Yahoo! quickly followed up with its own press release confirming the talks with Microsoft and stating that the board remains open to any and all transactions that maximize shareholder value.

This is clearly not what Mr. Icahn and other hedge fund managers who have been accumulating Yahoo! shares recently wanted to hear as it makes, in their opinion, an outright and imminent MSFT purchase of Yahoo! less likely (although not impossible!).

The obvious question is what kind of transaction could the two companies be contemplating? While they have kept silent on the issue, an agreement could be along the following two areas:

1. Yahoo! could outsource a piece of its search business to MSFT.

2. Yahoo! and Microsoft could combine their display ad businesses to create the #1 Player

Overall, MSFT/YHOO's statements over the week-end go against Mr. Icahn's plans as they make an outright and imminent MSFT purchase of Yahoo! less likely (although not impossible!). Jefferies believes Yahoo! shares are likely to trade lower on this news today.

Notablecalls: Can't believe YHOO is still trading above Friday's close in pre-mkt! Going lower.

Qualcomm (NASDAQ:QCOM): 5 Reasons To Own Qualcomm - Oppenheimer

Oppenheimer is out with a pretty big call on Qualcomm (NASDAQ:QCOM) saying they are bullish on the stock and see several reasons to buy the shares. Actually, there are 5 of them:

1) First, OpCo sees strong support for their FY09 estimate of $2.42 and meaningful upside as the 3G smart-phone arms race escalates with RIM and Apple joining the fray.

2) Legal conflict pushing toward resolution: In firm's opinion, the Nokia licensing situation remains the main point of uncertainty for QCOM. They view the July Delaware case as a turning point and potential catalyst for a resolution within the next year. Firm expects the Broadcom legal overhang to be lifted by year-end as the workarounds are implemented.

3) Third, analysis of large growth funds suggests most are on the sidelines. As QCOM's earnings reaccelerate, more will have to add to positions. Firm believes as much as $1.8B could flow into the name as a result.

4) With an improving legal front, strong smart-phone contribution and a return to earnings growth post stripping out Nokia, they see a case where historical P/E multiples of 23x can be supported. OpCo is adjusting their price target accordingly, using a 23x P/E multiple on our 2009 earnings estimate of $2.42 yielding a $56 price target (up from $52)

5) With QCOM still active on the buyback front we could see another ~$0.02 of accretion if the company exhausts the nearly $2B left on its current plan.

Notablecalls: Take a look at QCOM chart- the stock is on a verge of a major break-out. Opco's Ittai Kidron is out with a kick-arse call & will give the stock the needed push higher. QCOM's a keeper here, for sure.

Ctrip.com (NASDAQ:CTRP): Encountering Turbulence but Maintaining Buy - Citigroup

Citigroup comments on Ctrip.com (NASDAQ:CTRP) following earnings out last night saying they recommend taking advantage of any weakness as a buying opportunity for long-term investors.

Though Ctrip's guidance has historically been conservative, the company lowered rev YoY growth guidance to "30% for 2Q," but on the call, re-affirmed FY08 guidance of 35%. This lower guidance is primarily attributed to the earthquake in Sichuan, which has impacted travel to the province and dampened overall travel sentiment.

Addressing recent concerns over deteriorating domestic traffic YoY growth from the Big 3 Chinese airlines, with YoY growth slowing to 3.9% in March and 3.7% in April, the firm stresses that Ctrip continues to outpace the market due to market share gains from local agencies, with air ticketing revs up 68% YoY vs. the market up 10% in 1Q.

Reits Buy and $78 tgt.

Notablecalls: I feel CTRP represents a pretty solid bounce candidate. The co continues to execute in the midst of a perfect storm (snowstorms, earthquake in Sichuan, upcoming Olympics, dampening overall demand).

The stock will get hit today but I will be buying it starting from $57 (long here some but willing to avrg down) as I feel there is a lot of inst. buy interest in the name.

Just a hiccup.

Zimmer Holdings (NYSE:ZMH): Baird downgrade should push the stock down today

Baird is lowering their rating on Zimmer Holdings (NYSE:ZMH) to Neutral from Outperform as they believe near-term financial impact of Durom hip cup issue could prove meaningful and, even if cup design is eventually vindicated, hip market share loss could continue/potentially accelerate over next 12-24+ months. As such, they believe potential turnaround at ZMH has been pushed to 2010 or beyond and that risk to '08/'09 EPS consensus now exists.

If the use of Durom falls off as we suspect it might, firm's checks suggest as much as 5-10% of ZMH's worldwide hip business could be lost. And because large diameter metal heads are paired with Durom cup, they believe ZMH would also lose one of the most rapidly growing constructs in its hip portfolio near-term.

All in, Baird believes this issue could cause ZMH's hip business to trend relatively flat over the next 12-18 months and believes lost hip revenues and lack of overhead absorption if production is shut down could conservatively reduce '08 and '09 EPS projections to $4.08 and $4.60, respectively, vs. $4.15 and $4.76 previously (investigation costs, costs if recall occurs, etc. could impact even more).

Target is lowered to $74 from $85.

Notablecalls: This is a pretty nasty downgrade from Baird. I suspect the stock will go below $65 level today, thus offering a short-selling oppy early on. Several firms have been defending ZMH lately but Baird's comments should give the buyers some reason to rethink their thesis.

eBay (NASDAQ:EBAY): Removed from Top Picks list at Piper Jaffray

Piper Jaffray is removing eBay (NASDAQ:EBAY) from their Top Internet Picks list and lowering tgt to $38 from $40 after their checks showed U.S. GMV meaningfully slowed in April. Firm is lowering 2Q U.S. marketplace growth to 3% y/y vs. previous 8% due to low buyer activity (eBay noted softening buyer activity at the end of Q1 on its Q1 call).

Increasing 2Q int'l marketplace to 18% y/y vs. previous 15%, driven by strength in int'l listings and only modest declines in conversion rates/ASPs. In total, only slightly lowering Q2 est - remain above consensus.

Removing as an Internet top pick as weakness in U.S. GMV will likely be a near-term overhang.

Notablecalls: NCN Ugg thinks EBAY will take a dive following these comments. His exact words:

"...The removal of the top-pick, combined with the lowering of their PT to $38 I suspect, will pressure the shares early on.."

Me? I concur. Have learned not to mess with the Ugg!

Smurfit-Stone (NASDAQ:SSCC): Bounce candidate

Deutsche Bank is out with a good call on Smurfit-Stone (NASDAQ:SSCC) & other badly beated down sector names saying recent event may support containerboard prices: 1) an explosion is causing an unexpected outage at a large IP mill 2) the IP/WY deal received quick regulatory approval. Without that IP mill, the effective linerboard operating rate is near practical capacity. At the same time, the rapid approval of the IP/WY deal removes a potential "loose cannon" from the market. Firm notes the loss of IP's Vicksburg mill is a "big deal" - if the mill is out for any extended period of time. Maintains Buy & $15 target on SSCC.

Notablecalls: SSCC represents a very nice bounce candidate here, in my opinion.

Sandisk (NASDAQ:SNDK): Moving into the seasonal sweet spot - Citigroup

Citigroup says mid-qtr check on Sandisk (NASDAQ:SNDK) fundamentals suggests positive EPS revision pressure is forming, in line w/seasonal norms which in yrs past have been '+' for the stock. Demand risks exist (handset), though CIR thinks rising contract pricing from June to October is a reasonable outlook. SNDK is Citi's mid-cap top pick on contract pricing and EPS revision catalysts.

Since 2003 Street EPS have jumped 22% and 43% in 2Q and 3Q, respectively (shares by 18% and 34%). Firm recalls that contract pricing risks shift to the upside from May to September (back to school and pre-holiday demand), though broader chip industry orders are most benign from June to August. NAND's comparative seasonal strength should augur well for SNDK shares if fundamental and estimate trends emerge in 2Q08/3Q08 as they think possible.

Reits Buy.

Notablecalls: Worth maybe 1pt upside here.

Notable Calls Network (NCN): Cheniere Energy (AMEX:LNG)

Notable Calls Network (NCN) members were offered a superb trading opportunity this morning in shares of Cheniere Energy (AMEX:LNG). Early on I got a heads up from a NCN member saying RBC Capital was out with a major negative call on LNG.

Indeed, RBC was out lowering their rating on LNG to Underperform from Outperform w/ tgt cut to $1 from $20.

According to the firm new liquidity analysis shows that risk to investors far outweigh the gains, at present: ($64)MM cash position by 3/31/2010 from roughly break- even. Therefore, between the lower than expected quarter-end cash position and higher than expected completion cost of CTP, they believe that the liquidity position of Cheniere is no longer sufficient enough to reach early 2010 without substantial externalities helping to bridge the gap. Firm estimated a negative $64MM cash position by 3/31/2010.

They believe term loan holder has incentive to push Cheniere into Chapter 11.

So, RBC was pretty much saying the liquefied natural gas (LNG) project developer was kaput.

I took a quick look at the chart and saw the stock had already taken a big hit falling from $40 to $5 and change in 6 months. Yet, I felt that RBC's call was major enough to push it down even further so, around 8:00 AM ET I issued the following call to all NCN members that were online:

"..Heads up on Cheniere (NYSE:LNG) - RBC Capital downgrading the stock to Underperform & lowering tgt to $1 from $20 basically saying Chap11 is coming. I feel the stock will be trading in the low $4 or even below $4 today. - worth a look - fyi.."


The stock was trading around $5 and change in pre-mkt when I issued the call, giving early NCN members some nice fills. Most of the real action took place at around $4.70.

To my delight & I'm sure to the delight of NCN members the stock plunged right after open to around $3.7 giving us a nice $1+ gain, depending on one's entry. It's not every day one gets to make $1+ profits in $5 stocks, eh?

This is how Notable Calls Network (NCN) works - sharing the flow.


Want to be part of NCN?

It's easy. Just shoot me a brief email that includes a short description of yourself and your AOL nickname.

Please do note that contacts via IM are limited to people with:

- 3+ years of trading experience

- Access to quality research/analyst commentary

- Ability to generate and share (intraday) trading calls

I will not accept contacts from purely technically oriented traders, penny stock fans or people who have less than 3 years of experience in the field.

RUMOUR MILL: American Intl Group (NYSE:AIG)

A great contact just pinged me saying there's a good chance American Intl Group (NYSE:AIG) is going to announce a secondary & a convert tonight.

".. and all I know is I can buy as much stock as I want on the secondary. Never a good sign. Wouldn't shock me if they priced it below $39.."

So you know..

PS: Goldman Sachs downgraded the stock to Neutral from Buy this AM.

Blockbuster (NYSE:BBI): Stock could be worth $11 - Citigroup

Citigroup is out with a pretty huge call on Blockbuster (NYSE:BBI) saying that despite widespread negative sentiment on BBI's proposed acquisition of CC, they believe the potential deal fits with management's current strategy and see compelling reasons for the merger.

They believe it is key to realize that a BBI-owned CC will likely look very different than today as BBI integrates CC stores into its restructuring plans (including the potential addition of beverage & gaming lounges).

otential for Meaningful Synergies - Successful integration of CC would likely drive revenue and cost synergies. Citi's conservative estimates, which assume only 2% revenue synergies and modest cost savings, point to incremental EBITDA of $433 mil in 2008 and $571 mil in 2009.

hat's the Stock Worth- - Applying pro forma estimates to a 4x '10 EV/EBITDA target multiple suggests BBI could be worth over $8/share (in-line with current target price). However, successful execution of the deal would likely drive investors to assign a valuation to BBI that is more in-line with other retailers (currently 5.1x), which points to the stock being worth almost $11.

Reits Buy and $8 tgt.

Notablecalls: I expect the stock trade close to the $3 level today. This is certainly an out-of-consensus call and will generate ample interest among traders and inst. investors.

Synchronoss (NASDAQ:SNCR): Actionable Call Alert 2

Goldman Sachs out positive on Synchronoss (NASDAQ:SNCR) following meetings with co's management. Firm says they came away with greater clarity on the company's approach to its revised 2008 expectations. They believe management has a strong appreciation of its need to rebuild credibility with the investment community after two quarters of disappointment due to the iPhone, and therefore decided to make adjustments around guidance to provide a baseline from which it can be constructive going forward.

Firm retains their Buy rating due to the strength in non-iPhone core accounts which are set to accelerate throughout 2008 and into 2009, as well as belief that iPhone contributions have now been appropriately managed down. At this juncture, iPhone trends are largely outside management's control, with unlocked activity resulting in very low visibility into volumes. As a result, iPhone revenue expectations now incorporate meager volume assumptions for the rest of 2008, in our view, in an effort to avoid further disappointment. Additionally, they believe the low end of guidance factors in a risk that iPhone revenue in 2H08 could be close to zero should the activation process shift away from the current on-line model, although they believe Apple would likely be reluctant to allow for this change.

Goldman expects the stock will recover from this near-term set-back and that trends outside of the iPhone remain robust.

Notablecalls: The little hairs on the back of my neck are tingling. This is how wonderful I think the call is. Going to re-issue my Actionable Call Alert!

PS: I suspect SNCR will trade over the $13 level as soon as today. - fyi

Peabody (NYSE:BTU): Morgan Stanley ups tgt to $80 from $54

Morgan Stanley is out with a positive call on Peabody (NYSE:BTU) raising their tgt significantly from $54 to $80. According to the firm the co is increasingly a play on execution of a growth story in Australia. BTU has underperformed peers largely due to disappointing results in its Australian segment. MSCO thinks results will improve as coal chain expansions should allow Peabody to grow production, ease cost pressures, and improve its mix of high-margin metallurgical coal.

The firm thinks BTU can reach +30 mm tonne production sooner than expected, and on minimal investment. They expect improved pricing and volume, mostly in Australia, to result in EBITDA tripling from 2007 to 2009.

Reits Overweight.

Notablecalls: This is a pretty powerful call, ladies and gentlemen. Peabody has lagged peers recently due in large part to the performance of its Australian operations. Now Morgan Stanley says things are about to get better there & that the stock will catch up with peers.

This call is worth 1-3 pts of upside in the stock.

Hansen Natural (NASDAQ:HANS): JP Morgan defends the stock

JP Morgan is out defending Hansen Natural (NASDAQ:HANS) following weaker than expected quarterly results out last night:

Firm notes they remain Overweight here for a couple key reasons:

While Q1 EPS was a big disappointment, they do expect results to improve in the remainder of the year, as Hansen shipments start to more closely match underlying strength in retail sales based on Nielsen scanner data, and margin pressure dissipates. Second, based on after hours trading and their new EPS forecast, Hansen is trading at 15.7 times 2008E EPS, which the firm views as too low given retail sales momentum, and they believe is unfairly towards the lower end of Hansen’s lower growth beverage peers. They view valuation as particularly attractive given acquisition potential with recent industry consolidation of small, high-growth beverage companies, as well as Hansen’s strong balance sheet with $3.26 per share in net cash/investments and a share repurchase program in place comprising 7% of shares.

Notablecalls: We may see a bounce in HANS today.

PS: Note that Goldman Sachs is throwing in the towel downgrading their rating to Neutral from Buy this morning.

Synchronoss (NASDAQ:SNCR): Actionable Buy Alert!

Two tier-1 firms are out defending Synchronoss (NASDAQ:SNCR) following last night 45% decline in response to weaker than expected guidance:

- Deutsche Bank notes management attempted a delicate balancing act on the call, tempering a rough 2008 with brighter prospects for 2009. Overall, the firm believes the good news outweighs the bad. Investments made in Europe are starting to pay off as the company is in certification testing with Vodafone in Germany. Time Warner Cable will use Synchronoss technology for orders placed on their web site. Another (un-named) existing customer will deploy SNCR for a fixed-mobile convergence offering. Other significant items discussed include agreement with a leading European handset maker for online activation, a global agreement with Brightpoint, a handset logistics and fulfillment provider, and partnership with a global systems integrator who is including SNCR in their customer RFP responses. The company also announced a $25m buyback

The number of iPhones activated in 1Q08 and expected to be activated at AT&T this quarter are a minor disappointment relative to what SNCR expected. And by DB's calculations, the company's guidance (company claimed to remove $30m iPhone activation revenue from 2008) essentially leaves out any upside. They believe SNCR will continue to activate the new phone when it launches and estimate a revenue upside of up to $15m and EPS upside of $0.20. Reits Buy w/ tgt lowered to $30 from $45.

- Goldman Sachs notes the iPhone has very quickly turned from a blessing to a curse with SNCR's outlook reduced for the second quarter in a row due the product. 2Q2008 guidance now implies that iPhone activations have dramatically decelerated over the course of April, likely as consumers prepare for the 3G iPhone launch widely anticipated in June. However, the company's 2H2008 outlook does not reflect any meaningful recovery in iPhone activations relative to 1H. GSCO believes management has simply thrown in the towel in attempting to meaningfully forecast iPhone contributions due to the near-term erosion in activation visibility, and they, therefore, expect this is the "kitchen sink" quarter.

As a result, they are maintaining their Buy rating as the forward outlook now appears overly conservative relative to our iPhone expectations, noting new, albeit lower, estimates are 10%-20% above guidance and are supported by iPhone forecasts consistent with Apple and AT&T analyst teams. As a result, the firm expects the 40% downdraft in the stock after-market will prove to be a buying opportunity. 6-month tgt is lowered to $19 from $38.

Notablecalls: Oh my, SNCR sure took a bad beating in after hours. I feel for the longs. Truly do. This is what investing nightmares are made of.

Yet, with every faliure comes opportunity.

I'm going to rate SNCR an Actionable Buy under $15. Yes, Actionable! The iPhone is not going to go away. It can only get better from here with 3G & possibly better anti-unlocking features. I'm sure At&T is not happy with 40-50% of iPhone's being unlocked. Also, SCNR isn't just iPhone. SNCR just signed up a 'leading European handset maker' for online activation.

With two tier-1 firms defending the stock here it's going to bounce. No question about it.

PS: Kudos goes to ThinkEquity's (hate the new name!) SNCR analyst Eric Kainer who downgraded the stock just last week anticipating weaker than expected results & guidance. Keep up the good work!

Nvidia (NASDAQ:NVDA): Cautious on the stock at this stage - Goldman Sachs

Goldman Sachs comments on Nvidia (NASDAQ:NVDA) ahead of quarterly results (May 8) saying both their checks and the recently released Mercury Research data suggest little upside to the current quarter, with slight headwinds from notebook GPUs and chipsets. GSCO is modeling FY1Q09 at $1,141 mn (-5.1% qoq)/EPS $0.34 vs. the Street at $1,153 mn (-4.1% qoq)/EPS $0.38. Perhaps more important, they think pockets of excess inventory at OEM customers could drive FY2Q09 guidance below the Street estimate of $1,123 mn/$0.37.

With the stock already up nearly 25% from recent lows, they think investor expectations could be somewhat inflated at this point. Firm remains cautious on the stock at this stage given 1) checks indicate excess inventory at graphics card OEMs that could drive lower-than-expected FY2Q guidance, 2) below-seasonal shipments by Nvidia's top customers Asustek and Microstar, 3) their view that there is limited upside to Nvidia's current market share in desktop GPUs and chipsets, and 4) the long-term competitive threat posed by Intel. Although valuation is still reasonable at 16X CY2009 EPS estimate, they await a better entry point as they think below-Street guidance for FY2Q09 is likely to drive a pullback in the stock from current levels.

Notablecalls: Expect to see weakness in NVDA today and possibly tomorrow.

Sprint Nextel (NYSE:S): Short that upgrade?

We have some news & comments on Sprint Nextel (NYSE:S) that make the stock a short in my book despite the upgrade from Cowen & Co:

- Banc of America notes they don't view a declaration that one or another party is looking to the investment merits of Sprint as news. They'd be dismayed if every private equity and telecom concern, foreign and domestic, wasn't constantly assessing the M&A and competitive landscape. This said, their initial response is that the hash of three different technologies might represent looks more like Sprint Nextel 2.0 in the making than anything else. The 1.0 version of this exercise was warning enough, in firm's view, about the risks and rewards of achieving bigness for its own sake.

The notion that Sprint could conceivably spin off iDEN is also not novel in BofA's view. Since the close of the Sprint Nextel transaction itself, Sprint has been thinking about the day when it would sever the network from the core. Since writing down nearly the whole of the iDEN business, this prospect has seemed even more tangible. This said, the iDEN business is right now possibly Sprint's most profitable business, even if it is in decline.

Could Sprint be on the verge of recasting the new CEO's strategy barely weeks after articulation, separating the iDEN business from the CDMA business and throwing to the wind the long-sought synergy benefits of doubling up on one technology? And then selling the CDMA business to GSM-based T-Mobile? Tantalizing. Is this what the news out today is telling us? Not even close, in firm's view.

So, heading into possibly the poorest quarterly report in recent wireless history, Sprint shares are up not on what is in any way a better financial picture, but merely, as they read it, inference. The firm maintains Sprint's challenges are addressable, but over the long term, and until concrete signs emerge that the business is stabilizing, which is not now, it seems too incredible that an outside party will ride to the rescue of stockholders. Maintains Neutral.

- BMO Capital notes Qwest and Verizon Wireless have announced that they have entered into a five-year agreement for Qwest to market and sell Verizon Wireless services. The current service provider is Sprint. Qwest had discussed the potential of doing a wireless deal with Verizon stating that the current deal with Sprint did not provide it with access to updated devices, and voice/data service plans, hence hampering its success in the market.

Qwest currently has over 800,000 customers on Sprint's CDMA network. This will likely be a negative for Sprint as the firm expects these customers could migrate over to the Verizon network over time.

Maintains Neutral rating and $9 tgt on S.

Notablecalls: First of all, Cowen & Co is out upgrading S to Outperform based expectation of a near-term deal that would unlock value for shareholders. I think the wonderful people at Cowen should read the BofA call. There won't be a n-t value unlocking event. Even if there is one, it's likely going to be a deal with Clearwire where I just don't see any unlocking of value happening.

I spoke to NCN Telco just yesterday and he said that @ $9 S is fairly valued and that he'd be shorting there.

So, S is a short on today's Cowen upgrade induced gap-up.

At least in my book.

Yahoo (NASDAQ:YHOO): Colour on news

Several firms are out with comments on Yahoo (NASDAQ:YHOO) after Mr. Softee pulled its offer over the weekend:

- Piper Jaffray notes that while Microsoft officially pulled the bid to acquire Yahoo!, there are still many pieces and players that need to sort out before the dust truly settles. First, there is the obvious possibility that Yahoo! and Microsoft do hold further talks to potentially reach an agreement. As detailed in their 5/2 industry note on the proposed deal, Piper continues to believe that Microsoft needs help to create a formidable online advertising presence and believe Yahoo! still makes the most sense as an acquisition. Currently, Microsoft lags at third or lower in many major online advertising spaces: search, display, third party, and video; a Yahoo!acquisition would propel Microsoft into or near the lead in many of those categories. Firm believes there is still about a 30% chance a deal occurs despite the formal bid retraction. Separately, they believe there will be pressure from Yahoo! shareholders to quickly engage in other partnerships to maximize value including a search outsourcing deal with Google and/or an AOL merger. Maintains Neutral on YHOO stock with tgt lowered to $23 from $31.

- ThinkPanmure (what an earth of a name is this?! What happened to good old ThinkEquity?) notes that in what may likely to go down as one of the more destructive decisions for shareholder value in the history of Internet stocks, Yahoo!'s management and Board rejected Microsoft's final offer of $33 per share. To say they are disappointed is an understatement—dispirited is more like it. Firm expects most investors to feel the same and for YHOO shares to fall to fair value based on the company's stand-alone growth prospects, which they estimate at $20 or roughly 40% below Microsoft's last bid. At $20, YHOO shares would trade at an average of 9x 2009E EBITDA and 20x 2009E FCF/share.

Rating is lowered to Sell (from Acc) with tgt going to $20 from $31.

- Citigroup is lowering their rating to Sell saying YHOO stock will go down materially today. YHOO's stock was at $19.18 when MSFT made its bid. But they believe it's very unlikely YHOO will trade within 10% of that: 1) Major Indices (NASDAQ, S&P 500) and other major Internet stocks are generally up 3%+ since then; more importantly, 2) Strategic options like Search Outsourcing to Google and an AOL partnership have clearly been developed since then; and most importantly, 3) YHOO will remain in play, either on the belief that MSFT will come back (a la Oracle-BEA) or another bidder will emerge (News Corp-).

In Citi's opinion, YHOO has gone from an Event Stock to a Scenario Stock. They simplify to Three Scenarios. 1) Back To Business As Usual: With '08 remaining another major investment year and the company likely a sustainable low-double-digit EBITDA grower warranting a Media Multiple - 45% probability/$22 Stock = 8X '09 EBITDA; 2) Major Strategic Alternative: Google Search Outsourcing, AOL or MySpace Partnership, Asia Asset Sale & Substantial Buyback - 40% probability/$26 Stock - biggest upside is likely Google Outsource, which could add $1B+ in cashflow worth $6 per share to YHOO; & 3) MSFT-YHOO Deal Happens: 7% solution found and deal happens at $35 -- 15% probability/$35 Stock. Weight average these and YHOO now worth $26. Hence the Sell.

Notablecalls: I suspect MSFT is playing hardball with YHOO here. Yahoo will get sold to MSFT in the next 6 months as major holders like Legg Mason's Bill Miller will push the deal through. Buying YHOO @ $22 leaves ample upside w/ no significant downside risk. An ideal trade many hedgies will put on as soon as today. My gut tells me YHOO will trade over $23 level today.

I'm a buyer here around $22 and change.

Stec (NASDAQ:STEC): Short term positive but short lived? - Avian Research

Avian Research was out with an awesome intraday call on Stec (NASDAQ:STEC) on Friday. With the kind permission of Larry Zirkel their head of sales & trading, here's the meat of it:

..Recently numerous reports have indicated STEC has won a design for an MLC based SSD in the Apple (AAPL) MacBook Air. Follow up conversations with industry sources have basically confirmed this win. We were told that Apple initially approached Samsung about using its MLC SSD to replace the current SLC SSD in the MacBook Air. This view was based on Apple’s belief (which we agree) that using MLC SSD is the only way to make it more compelling for wide-spread consumer adoption as the current SSD upgrade costs $999.

Following months of negotiations both Apple and Samsung were unable to come to terms due to specific performance and pricing issues, and Apple then decided to seek STEC's alternative solutions. Although it's obvious that this win is important to STEC, our conversations suggest that this design win may be short-lived. In particular it has been suggested that Intel (INTC) has made inroads with AAPL and will see traction there once its design proves out. As a reminder MU and INTC have been substantial providers of NAND components to AAPL's other products. Longer-term we remain unconvinced that STEC will be able to parlay early design wins into a sustainable market leadership position as it doesn’t have the scale, particularly given a competitive landscape which includes a host of better financed companies with access to internal flash production. However there is no doubt that such a win is a short term positive for STEC...

Notablecalls: This is what I call research! While most of the sell-side is going ga-ga over STEC's potential, Avian's team has gone the extra mile and brought new perspective on the topic. Well done, guys!

Dynamic Materials Corp (NASDAQ:BOOM): In-Line Results but June Guidance May Shake Weak - Broadpoint

Broadpoint is out in defense of Dynamic Materials Corp (NASDAQ:BOOM) following results out last night:

According to the firm, a weaker than expected June quarter may require stronger ramp in the second half for the company to meet its unchanged CY08 guidance. They continue to believe in the long-term growth and would be buyers of this quality name on any weakness.

The company's backlog for explosive metalworking was up slightly to $102M at the end of the March Q vs. $100M in December. This was once again, in-line with firm's expectations of a "stable" backlog.

The company left its CY08 guidance of 60% Y/Y revenue growth (due to the DYNAenergetics acquisition) unchanged but 2Q:CY08 results are expected to be at the same level as 1Q:CY08. This was below consensus estimates of $0.56 on $64M. A weaker than expected June Q may require stronger ramp in the second half for the company to meet its unchanged CY08 guidance.

On the conference call, management talked about significant price increases and tension in the supply chain of high-quality carbon steel. Broadpoint believes in the worst case, this may lead to
some timing risk but clearly not lost business.They believe long-term business fundamentals remain strong and recommend that investors continue to add to positions on any pullback. They reiterate their Buy rating and $58 price target (20x CY09 EPS estimates of $2.90) on the stock.

Notablecalls: I think BOOM represents a good bounce play around the $40 level.

Herbalife (NYSE:HLF): Bounce candidate?

Herbalife (NYSE:HLF) reported excellent qtr and we have Goldman Sachs out saying they believe that this significant EPS out performance will largely overshadow the disappointing resignation of Greg Probert and would expect the shares to rally today, especially given how weak they have been of late.

Fyi,

NC

Notablecalls: The stock is currently trading around $41.80 and I strongly suggest you use this weakness to buy the stock. It was trading around $46.50 in the pre market. Looks like we have some profit taking here but it wont last much.